TPO in America: How would FIFA's third-party ban affect USA leagues?

When Jermaine Jones joined Major League Soccer, both the Chicago Fire and New England Revolution wanted him. The league assigned him to New England via blind draw despite the player’s desire to join Chicago. Depending how FIFA defines its decision to ban third-party ownership of players, MLS could find it difficult to sign foreign stars under the same circumstances, should two teams be vying for his signature.

The FIFA Executive Committee ruled in September that third-party ownership should be eradicated. The matter is now back in the hands of FIFA’s working group on third-party ownership, which met Thursday in Zurich to continue negotiating specifics.

Worldwide implications will be unclear until legislation is finalized. FIFA denied comment on the ruling, and MLS officials would not speak on the record about its possible impact.

“We cannot provide an estimation about the expected time line nor comment on any potential implications as long as the relevant process … is ongoing,” a FIFA spokesperson told SI.com in an email earlier this month.

The ban comes as no surprise to those in the game here, although high-profile brushes with third-party ownership are rare in the United States. MLS generally refuses to complete deals involving third-party influences.

“I think it’s been a long time coming in terms of that, because it’s been under a microscope for a while now, especially when it started happening in the U.K.,” American agent Lyle Yorks said in a phone interview. “It was only a matter of time before FIFA stepped into it and tried to change rules.”

Yorks, who works for James Grant Sports Ltd. and represents the likes of Clint Dempsey and Jozy Altidore, said he has never personally been involved in a third-party deal.

The college system that houses many of MLS’s domestic prospects also provides them with financial support in their player development via scholarship the same way third-party investors might give money to younger players in poorer parts of South America.

The NASL is more familiar with the practice due to Traffic Sports’ ownership of multiple teams in the league. At one point, the agency headquartered in Brazil with a branch in Miami owned stakes in four franchises, although it only owns the Carolina RailHawks now, after selling its share in the Fort Lauderdale Strikers earlier this season.

Traffic owned Colorado Rapids defender Gale Agbossoumonde’s rights from 2009 to 2013, after he turned down an MLS offer. His involvement with the agency touched off a global odyssey that spanned from NASL to Portugal, Sweden and Germany before finishing his contract with Carolina. He eventually joined MLS in 2013 as a free agent.

The U.S. market continues to grow, and so does interest from international players and franchise owners. Strong support for football, including from a vast number of immigrants, and the country’s sporting infrastructure only solidify that interest.

“It’s a fantastic market. Everybody has their eyes now on the U.S. market,” Marcos Motta, a Brazilian lawyer and member of FIFA’s working group on third-party ownership, said in a phone interview. “I think they need to have a major restructuring of the contracts in the U.S. not only regarding international players because FIFA, they disregard the local law if there were an international dispute.”

FIFA can’t enforce any regulations, including a potential TPO ban, as long as all parties concerned in a dispute are local, and the single-entity system of centralized player ownership is valid under American law. It could only become problematic if an international dispute went before FIFA.

“The single-entity definition is valid within the U.S. jurisdiction. This is good when you discuss this in local courts in the U.S., but when you’re talking about international transactions, the FIFA regulations are mandatory,” Motta said. “This could represent a problem to the structure in the U.S. market. … It [MLS’s model] works really well. It’s a fantastic model, but you have to work with peculiarities and specificities of each [sport]. Football is different from the NBA.”

Motta advises clubs and players in MLS and the NASL but declined to name them, citing confidentiality agreements. He served as legal counsel in hundreds of FIFA and Court of Arbitration for Sport cases, and his experience in the U.S. includes a certificate from Harvard Law School and stints as a visiting lecturer at St. John’s University.

Yorks agreed that MLS’s model could constitute third-party ownership.

“By definition, I guess the structure of MLS would be third-party because — again, by definition — the players are owned by the league, and also with the clubs, you have to go through both,” he said. “I’ve done quite a few transfers into the league and also out of the league, so it’s basically just an extra voice in the room where you have to agree with both the club and the league, and there are percentages that get split between the two.”

Splitting transfer percentages is a staple of third-party ownership and co-ownership, in which two clubs own a single player’s contract. The latter is more common in Italy, but the two are closely related and similar in practical terms.

In MLS, the league holds bargaining power as the central holder of player contracts, unlike an open-ended system where clubs negotiate and drive up transfer costs. Issues such as the blind draw for Jones’ rights could represent a third-party influence, as could its control on transfers out of the league, even if it’s not traditional TPO.

“The [FIFA] agenda always discusses that TPO is per se problematic because there is a potential influence of a third party not belonging to the football family intervening and influencing the competition and the relationship between clubs and players,” Motta said. “This is exactly what MLS does. ...

“Nobody obliges the football market in the U.S. to be adapted [to international standards]. That’s what I used to say in some court cases when we have some claims against Middle Eastern clubs, for example: listen guys, nobody’s obliging you to take part in the international organized football. You can play your own league in Saudi Arabia, but from the moment you decide to jump into the international market and hire international players, you are part of a global market, and you have global rules to follow. That’s the point.”

U.S. Soccer president Sunil Gulati is a powerful potential advocate of MLS’s idiosyncrasies in this situation, with his influence as a member of the Executive Committee representing American interests at the highest levels of FIFA governance. U.S. Soccer declined interview requests for Gulati, yielding to FIFA’s media department for comment.

MLS’ single-entity system started as a direct response to the perceived dangers of a volatile market, and change to that system has been slow. It presents a unique challenge to agents, but Yorks said every market has quirks that must be respected in negotiations.

“It’s different than the deals that I’ve done in Europe,” he said. “You’re dealing with not only the ownership group, but you’re also dealing with the league on that one. It’s just a different type of deal; it’s just constructed differently. Fortunately, we’ve been successful to find a middle ground in most cases.”

Still, the MLS structure looks increasingly like a relic from more tumultuous times. The upcoming collective bargaining agreement negotiations could represent another turning point in the league’s history, as the current deal expires after the 2014 season.

“That [negotiation] will be very interesting to see, but I do get why single-entity was there from the beginning,” Yorks said. “You don’t have to look too far back in my lifetime, to the NASL, New York Cosmos and the stars they brought in, and it was unsustainable.”

Third-party ownership wasn’t a major talking point around the world at MLS’s founding. Still, the league’s central control of player registrations exists in a gray area. True free agency would untangle the player acquisitions could make MLS appealing to more internationals, who are used to the freedom of movement among independent clubs.

“Free agency is one of the big items that certainly shifts and makes it a lot easier for the players to move freely,” Yorks said. “It’s going to be interesting to see where that goes, but anytime for a player, you would want to be in a scenario where you do have free agency, transparency and autonomy.”

FIFA’s ruling on third-party ownership could affect change, along with CBA negotiations. Relaxing restrictions would be a natural step in the league’s evolution as it stabilizes and the U.S. market continues to grow.

“I think those changes won’t be made because of any ruling with FIFA; I think those changes will be made at a different level,” Yorks said. “They may happen, or they may not happen, and there will be a lot of different voices in that discussion.”

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